Can Monicals Pizza unreasonably withhold approval of a franchisee's lease or purchase agreement for an approved location?
Monicals_Pizza Franchise · 2025 FDDAnswer from 2025 FDD Document
After the designation of the Approved Location, Franchisee shall execute a lease for, or a binding agreement to purchase, the Approved Location, the terms of which must have been previously approved by Franchisor in writing. Franchisor shall not unreasonably withhold its approval. Franchisor's review of a lease or purchase agreement, or any advice or recommendation offered by Franchisor, shall not constitute a representation, guarantee or indication that Franchisee will succeed at the Approved Location nor constitute an expression of Franchisor's opinion regarding the terms of such lease or purchase agreement. Franchisor shall be entitled to require that nothing therein contained is contradictory to, or likely to interfere with, Franchisor's rights or Franchisee's duties under this Agreement. Franchisee shall take all actions necessary to remain in good standing under any lease of the Approved Location while this Agreement is in effect. Any default for which the lease may be terminated shall also be deemed a default hereunder, and the time to cure the same hereunder shall expire when the lease is terminated. Franchisor has the right to require that the lease for the Approved Location be collaterally assigned by Franchisee to Franchisor, pursuant to the terms of its standard collateral assignment of lease form, to secure performance by Franchisee of its obligation under this Agreement. Franchisor's approval of a lease shall be conditioned upon inclusion of terms in the lease acceptable to Franchisor and the lease shall contain a "Lease Addendum" in the form of Exhibit 4, fully executed by Franchisee and the lessor of the Approved Location.
Source: Item 23 — RECEIPTS (FDD pages 46–257)
What This Means (2025 FDD)
According to Monicals Pizza's 2025 Franchise Disclosure Document, after a location is approved, a franchisee must execute a lease or purchase agreement, which requires Monicals Pizza's prior written approval. Monicals Pizza agrees that it will not unreasonably withhold its approval of the lease or purchase agreement. However, Monicals Pizza's review and any advice given does not guarantee the franchisee's success at the location, nor does it represent an opinion on the terms of the agreement.
Monicals Pizza is entitled to ensure that the lease or purchase agreement does not contradict or interfere with its rights or the franchisee's duties under the Franchise Agreement. The franchisee must maintain good standing under the lease, and any default that could lead to termination of the lease is also considered a default under the Franchise Agreement. The cure period for such defaults expires when the lease is terminated.
Monicals Pizza has the right to require the franchisee to collaterally assign the lease to Monicals Pizza using its standard form to secure the franchisee's performance under the agreement. Approval of the lease is conditional upon including terms acceptable to Monicals Pizza and a fully executed Lease Addendum in the form of Exhibit 4. This ensures Monicals Pizza has certain protections and rights related to the property, and that the lease aligns with their requirements.